Small firms spend four days a month cutting through red tape

More than half of small business owners (55%) claim their company’s growth is being held back by the amount of time they have to dedicate to business administration, according to new research from the Federation of Small Businesses (FSB).

The findings show that a small business owner spends over 33 hours every month on internal business administration – representing almost a quarter of an individual’s average working hours. In addition, a typical small business sees around 70 hours of employee time tied up in business admin alone.

Two-thirds of smaller businesses (67%) say the administrative burden is preventing them from focusing on their business’ primary purpose. The study reveals that three-quarters of business owners (76%) spend more time than they would like on business compliance, tackling issues ranging from tax, employment law issues and insurance to dealing with workplace pensions, accounting tasks or health and safety issues.

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Dave Stallon, commercial director at FSB, commented: “The Government has pledged to remove £10 billion worth of red tape over the course of this Parliament. FSB welcomes this focus on deregulation, which should free up small business owners to spend more time doing business and creating economic growth. Initiatives like the Cutting Red Tape programme, the ‘one-in-three-out’ approach to new regulations, and steps to boost the Regulatory Policy Committee are all moves in the right direction.”

The FSB says that business administration is not just a burden on time, it can also have major cost implications.

Research shows that its members spend an average of £3,600 on help and advice with tax compliance. And it claims this figure is likely to rise given that new proposals around tax reporting will require small businesses and the self-employed to keep digital tax records and report, on a mandatory basis, electronically every quarter.

Owners say they could use the time spent on business administration more productively, with 61% claiming they would spend more time on sales or sales development.

Indeed, the average smaller business owner claims to only spend 8 hours 50 minutes per month on new business development, just a quarter (25%) of the time they spend on business administration.

Stallon adds: “It is a common frustration among owners of smaller companies that they are unable to find the time to work on their real business activities, because they are too busy completing administrative tasks, however essential they are. These businesses need expert support they can trust in order to minimise time dedicated to business administration. If they do this, they can maximise the time spent making their businesses bigger, better and more profitable.”

Nearly half of respondents to the survey (46%) said they would hire external advisors to help them with these tasks if they could afford to. However, it does come with a cost. The average smaller business that outsources these services spends almost £14,000 a year doing so.